Featured Stocks In December’s Most Attractive/Most Dangerous Model Portfolios

Recap from November’s Picks

The best performing Most Attractive large-cap stock gained 10% last month and the best performing Most Attractive small cap stock was up 13%. Overall, 18 out of the 40 Most Attractive stocks outperformed the S&P 500 in November.

Our Most Dangerous Stocks (-2.0%) outperformed the S&P 500 (-0.8%) as a short portfolio last month. The best performing Most Dangerous large-cap stock fell by 13% and the best performing Most Dangerous small cap stock fell by 25%. Overall, 21 out of the 40 Most Dangerous stocks outperformed the S&P 500 as shorts in November.

The successes of these model portfolios highlight the value of our machine learning and AI Robo-Analyst technology[1], which helps clients fulfill the fiduciary duty of care and make smarter investments[2].

15 new stocks make our Most Attractive list this month, and 20 new stocks fall onto the Most Dangerous list this month. December’s Most Attractive and Most Dangerous stocks were made available to members on December 5, 2018.

Our Most Attractive stocks have high and rising returns on invested capital (ROIC) and low price to economic book value ratios. Most Dangerous Stocks have misleading earnings and long growth appreciation periods implied by their market valuations.

Most Attractive Stocks Feature for December: AutoZone Inc. (AZO: $870/share)

AutoZone Inc. (AZO) is the featured stock from December’s Most Attractive Stocks Model Portfolio. AutoZone has been a favorite stock for quite some time and remains undervalued.

Over the past decade, AZO’s revenue has grown by 6% compounded annually, and its after-tax profit (NOPAT) has grown 7% compounded annually. The company’s NOPAT margin has improved from 11% in 2008 to 14% in 2018. AZO has earned a double-digit return on invested capital (ROIC) each year since 1998 and currently earns a top-quintile 24% ROIC.

Figure 1: AZO’s Revenue & NOPAT Since 2008

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Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

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